One of the things we hear most about when it comes to the iPhone 5 is that it will sport a bigger 4″ Retina Display. The Wall Street Journal reported back in May that Apple had already begun to place orders for screens that are “at least” 4 inches diagonally for the next generation iPhone. And now the publication is reporting (along with a tweet) that the new 2012 iPhone will feature an all new touchscreen technology that will allow for the display to be even thinner. This is in line with a previous rumour that speculated the iPhone 5 will be 20% slimmer than the iPhone 4S (9.3mm vs 7.4mm).

Developed and being manufactured by Sharp, LG and Japan Display, the new screens use what is being called “in-cell” technology, where touch sensors are integrated directly into the LCD. Without the previously required touch sensor layer, the screen not only becomes thinner, but the quality of images and text displayed is also improved. According to the WSJ:

Apple next iPhone, currently being manufactured by Asian component makers, will use a new technology that makes the smartphone’s screen thinner, people familiar with the matter said, as the U.S. technology giant strives to improve technological features amid intensifying competition from Samsung Electronics Co. and other rivals.

The technology integrates touch sensors into the LCD, making it unnecessary to have a separate touch-screen layer. The absence of the layer, usually about half-a-millimeter thick, not only makes the whole screen thinner, but improves the quality of displayed images, said DisplaySearch analyst Hiroshi Hayase.

WSJ also notes that the in-cell technology would simplify the supply chain and help cut costs for Apple, since touch panels and LCD panels will no longer have to be purchased from the various suppliers. A thinner screen would allow Apple to either make a slimmer iPhone 5, or use the additional space for components like an LTE antenna or larger battery. As for the challenges faced with making these new screens, sources have told WSJ that they’re much harder to manufacture than conventional LCD screens, and the manufacturing process has so far been “challenging and time-consuming. Despite this, it is expected that the iPhone 5 will be released some time in the fall – perhaps around the end of September or early October, the month when the iPhone 4S first launch back in 2011.

Here’s a video by ETrade Supply that shows the supposed backplate of the iPhone 5. Notice the bottom headphone jack, smaller dock port and SIM card slot, which are features all noted in a previous leak.